Press Release

VIS Upgrades Entity Ratings of JK Sugar Mills (Pvt.) Limited

Karachi, May 13, 2024: VIS Credit Rating Company Limited (VIS) upgrades entity Ratings of JK Sugar Mills (Pvt.) Limited (‘’JKSML’’ or ‘’the Company’’) to 'BBB+/A-2' (Triple B Plus/A Two) from BBB/A-2 (Triple B/A Two). Medium to long term rating of 'BBB+' indicates adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short-term rating of 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings remains Stable. Previous Rating action was announced on April 27, 2023.

JK Sugar Mills (Pvt.) Limited, established in April 2017, is principally involved in production and sale of sugar and allied products with two operational units in Punjab and Sindh. The shareholding of the company is vested with family members and associated concerns. The Company is part of JK group and formed through acquisitions with Ali Khan Tareen as the Chairperson and Ms. Seher Khan Tareen as Chief Executive Officer (CEO). The Company has longstanding relationships with growers along with focus on research activities in sugarcane development.

The upgrade in JKSML's ratings is attributed to its improved financial risk profile in MY23, propelled by continuous revenue growth from higher sugar prices and inventory gains. The net profit, however, contracted due to higher financial charges during the year. Concurrently, the coverage profile was marginally affected by increase in the finance cost. Gearing improved with timely debt repayments, although leverage rose with growing customer advances. While the liquidity position remains adequate, the rebound in the Company’s financial metrics in 1QMY24 also supports the upgradation.

The assigned ratings for JK Sugar Mills also reflect its medium business risk profile, bolstered by the sugar industry's moderate barriers to entry, capital-intensive setup, and low inherited technology risk. However, the industry's cyclicality, particularly regarding sugarcane production, poses risk to raw material availability. Nonetheless, the inelastic demand stemming from the growing population provides stability and assurance to the assigned ratings.

Going forward, the ratings of the Company will remain contingent on further improvement in its financial metrics. VIS will continue to monitor the pending litigation with the Competition Commission of Pakistan (CCP).

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.











Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .